Question

Ome people who are employed or who are not making a serious effort to find employment will report themselves as unemployed. (2) Some people who want to find work will be counted as out of the labour force. How do these facts affect the reported unemployment rate?

A. Both the first and the second facts tend to make the reported unemployment rate lower than the actual unemployment rate.
B. Both the first and the second facts tend to make the reported unemployment rate higher than the actual unemployment rate.
C. The first fact tends to make the reported unemployment rate higher than the actual unemployment rate. The second fact tends to make the reported unemployment rate lower than the actual rate.
D. The first fact tends to make the reported unemployment rate lower than the actual unemployment rate. The second fact tends to make the reported unemployment rate higher than the actual rate.

Answer 1

Fact one about misreported employment status increases the unemployment rate, while fact two about discouraged workers not counted as part of the labor force decreases it, so the correct answer is option C.

Step-by-step explanation:

The reported unemployment rate can be affected by how individuals are classified in employment surveys. The first fact mentioned suggests that some employed individuals may falsely report themselves as unemployed. This fact tends to make the reported unemployment rate higher than the actual rate.

The second fact indicates that some people who want work but are not actively searching—perhaps due to being discouraged—are not counted as part of the labor force, which can lead to a lower reported unemployment rate compared to the actual situation.

Therefore, the correct answer is C: The first fact tends to make the reported unemployment rate higher than the actual unemployment rate, while the second fact has the opposite effect, leading to a lower reported rate than the actual unemployment situation.